Sebi said the allegation of holding of positions in breach of the client level OI positions stands established.
Markets regulator Sebi has lifted its trading ban on five entities, including Ruchi Global and Ruchi Soya Industries, in a case related to alleged manipulation in castor seeds trading. National Steel & Agro Industries Ltd, Secunderabad Oils Ltd and UKS Oils Pvt Ltd are the other entities from whom the ban has been lifted.
Through two interim orders passed in March 2016 and May 2016, Sebi had barred the five entities, among others, from the securities markets for alleged fraudulent and manipulative trading in castor seeds on leading commodity bourse NCDEX. Later in March 2017, the directions issued against them were confirmed.
In an order passed on Wednesday, Sebi revoked the direction issued against the five entities with immediate effect.
In the show cause notice (SCN), it was alleged that by taking open interest (OI) positions in excess of the prescribed limits, the five entities were able to corner the market at the expense of other clients, and thus had traded in a fraudulent and deceitful manner and their excess OI positions created a false or misleading appearance in the market.
The SCN further said that Ruchi Global and Ruchi Soya Industries and National Steel & Agro Industries belonged to one distinct group, while Secunderabad Oils and UKS Oils belonged to another distinct group. “In the absence of any material to show that these two distinct groups were connected to each other and traded in the castor seeds contracts in a concerted manner to manipulate the market, it is not correct to allege that the five noticees together cornered the derivative market in castor seeds contract…in violation of PFUTP Regulations, 2003 and at the expense of other clients,” Sebi said.
It said the SCN does not provide any details as to whether these two distinct groups had coordinated between themselves to carry out such cornering of the market involving violation of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations.
“…Noticees held open interest in castor seed derivatives, in excess of the prescribed limits, thus in the absence of any other evidence to the effect that such positions were created for the purpose of manipulating or influencing the price and/or volume of the securities, the charge of violation of PFUTP Regulations, 2003 is not sustainable, in the facts and circumstances of the present case, ” Sebi noted.
However, Sebi said the allegation of holding of positions in breach of the client level OI positions stands established.
It noted that the entities have already suffered debarment by virtue of interim orders passed in March 2016 and May 2016 and a confirmatory order in March 2017, and have not been able to trade or hedge their positions in commodity derivative market during this period.
Accordingly, Sebi said, “the directions issued against the noticees (five entities) vide ad-interim orders dated March 2, 2016 and May 24, 2016 and confirmed vide order dated March 8, 2017 are hereby revoked with immediate effect.”
Sebi warned the entities to be careful in all their future dealings in securities market, and ensure that the same are done strictly in accordance with the law.